Get the very latest on important tax law changes that will impact returns for Tax Year 2012 from Intuit's Mike D'Avolio. These changes seem to come later and later each year. Let’s us do the legwork and keep you up to speed on current status of tax law changes and extensions.

1. 2012 Tax Law Update
Brought to you by:
Presented by:
Mike Davolio
Senior Tax Analyst
Intuit Accounting Professionals Division

2. Mike Davolio, CPA
Senior Tax Analyst
• With Intuit / Lacerte since 1987
• Monitor legislative and regulatory
activity
• Circulate information to employees
and customers
• Analyze and test software
• Train employees and customers
• Government liaison
• Public relations representative
2

3. Agenda
• 2012 Tax Law Changes
• Health Care Act Changes for 2013
• Tax Reform
• Internal Revenue Service Initiatives
3

4. 2012 Tax Law Changes

5. 3% Withholding Repeal &
Job Creation Act (PL 112-56, 11/21/11)
• Revised work opportunity credit for employers
(Form 5884)
• $5,600 credit for hiring veterans looking for work
over 6 months
• $9,600 for disabled veterans
• Covers work beginning after enactment date
• Credit extended 1 year for hiring veterans (2012)
• Repeals 3% withholding requirement on
government contractors
• Stricter eligibility requirement for premium
assistance credit for health insurance (2014)
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5

6. Extender Legislation
Congress
• Many tax measures expired at end of 2011 or will expire
at end of 2012 unless government extends
• First group impacts tax year 2012; second group impacts
tax year 2013 and 2013 estimates and withholding tables
Internal Revenue Service
• AMT patch (exemptions and special credit ordering rules)
could affect more than 60M taxpayers
• Extenders (tuition and fees deduction, etc.) not as
complex
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6

7. Individual provisions that expired on
12/31/11
• Alternative Minimum Tax Patch
• Increased exemptions (will decrease to $45,000 MFJ,
QW; $33,750 Single, HH; $22,500 MFS)
• Nonrefundable personal credits allowed to offset AMT
• Deduction for educator expenses
• Tuition and fees deduction
• Itemized deduction for sales tax
• Tax-free distributions from IRAs for charitable purposes
• Refundable portion of adoption credit
• Deduction for mortgage insurance premiums
7

8. Individual provisions that expired on
12/31/11 (cont.)
• Credit for energy-efficient improvements
• 100% exclusion for gain on small business stock
• Contributions of capital gain property for conservation
purposes
• Qualified zone academy bonds
• Deadline to claim low-income housing credits in GO Zone
• Tax incentives for District of Columbia
Footnote
• The government could let certain provisions expire for
upper income taxpayers and not expire for lower and
middle income taxpayers
8

9. Business provisions that expired on
12/31/11
• Research credit
• Employer wage credit for activated reservists
• Indian employment tax credit
• New markets tax credit
• Railroad track maintenance credit
• Mine rescue team training credit
• Reduction in S corporation recognition period for built-in
gains tax
• 15-year recovery period for leasehold improvements,
restaurant property and retail improvements
• Suspension of 100% of net income limit on percentage
depletion
9

10. Business provisions that expired on
12/31/11 (cont.)
• Accelerated depreciation for Indian reservation property
• Special rule for contributions of food and book inventories
• Special rule for corporate contributions of computer
technology or equipment for educational purposes
• Environmental cleanup costs deduction
• Deduction for domestic production activities in Puerto Rico
• Shareholder basis adjustment for stock of S corporations
making charitable contributions
• 7-year recovery period for motorsports entertainment
complex property
• Empowerment zone tax incentives
10

11. Depreciation
• 50% bonus depreciation
• PIS after 12/31/11 & before 1/1/13
• Section 179 limit set at $139,000 with $560,000
phase-out threshold
• TY beginning after 12/31/11
• Off-the-shelf software qualifies as section 179
(through 2012)
• Election to accelerate AMT credit in lieu of bonus
depreciation (through 2012)
11

12. Provisions that will expire on 12/31/12
Tax cuts
• Tax rates: 10%, 15%, 25%, 28%, 33%, 35%
• Will increase to 15%, 28%, 31%, 36%, 39.6%
• Marriage penalty: size of 15% bracket and standard
deduction (MFJ and qualifying widow)
• Will decrease to 167%
Capital gain and qualified dividend rates
• LTCG and dividends taxed at maximum rate of 15%
• LTCG will increase to 20%; dividends will be treated as
ordinary income
2% payroll tax holiday
Estate, gift and generation skipping taxes
• Rates, exemption levels
12

13. Provisions that will expire on 12/31/12
(cont.)
Itemized deductions and personal exemptions not
phased out for higher income taxpayers
Changes to rules for the following provisions
• Child tax credit
• Earned income credit
• Dependent care credit
• American opportunity tax credit
• Adoption credit
• Student loan interest deduction
• Coverdell Education Saving Accounts
• Exclusion for employer-provided educational assistance
13

14. Roth IRAs & Designated Roth Accounts
• ½ of 2010 Roth conversion or rollover and
rollover to designated Roth account included in
income in 2012
• If taxpayer didn’t elect to include 100% in 2010
• Should have reported ½ in 2011
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15. Schedule D / Form 8949
• For TY12, Form 8949 will support the following:
• Schedule D (Forms 1040, 1120, 1120S, 1065,
1065-B)
• Form 8865 (Foreign Partnerships) will use
Schedule D (Form 1065) and thus Form 8949
• Schedule D for Form 1041 will not be modified to
use Form 8949
15

16. Form 1099-K Reporting
• No direct reporting of amounts from Form 1099-
K (Payment Card and Third Party Network
Transactions) on tax return
• Forms 1120, 1120S, 1065 and
Schedules C, C-EZ, E, F
• Form 1099-K still filed with IRS
16

17. Informational reporting of employer-
sponsored group health plan coverage
• Reporting of cost on Form W-2 optional if:
• Employer required to file fewer than 250 W-2s for
preceding calendar year
• W-2 furnished to employees who terminate before
end of a calendar year and request W-2 before
end of that year (in writing)
• W-2 provided by third-party sick-pay provider to
employees of other employers
• Chart:
http://www.irs.gov/newsroom/article/0,,id=254
321,00.html
17

18. Partnerships
• Partnerships allowed to provide Schedule
K-1 electronically to partners
• Recipient must affirmatively consent
• Furnisher must provide a disclosure statement
that details the arrangement
18

19. 2012 Standard Mileage Rates
Business
• 55.5 cents/mile
Medical and moving
• 23 cents/mile
Charitable
• 14 cents/mile
19

20. Inflation Adjustments
2011 2012
Elective Deferral Plan Limits Base $16,500 $17,000
(401(k), 403(b), SEPs, Thrift Catch-up $5,500 $5,500
Savings, state & local) Total $22,000 $22,500
Base $11,500 $11,500
408(p) Deferral Plan Limits Catch-up $2,500 $2,500
(SIMPLE Plan) Total $14,000 $14,000
Base $5,000 $5,000
IRA Deduction Catch-up $1,000 $1,000
Total $6,000 $6,000
Single/HOH $56,000-66,000 $58,000-68,000
IRA Phase-Out Ranges
MFJ/QW $90,000-110,000 $92,000-112,000
20

21. Health Care Act
Changes for 2013

22. Increased tax for high-earning workers and
self-employed
• New law: additional 0.9% (2.35% in total)
hospital insurance (HI) tax applies to wages
received in excess of
• $250,000 for MFJ; $125,000 for MFS; $200,000
for others
• Employers collect extra 0.9% on wages exceeding
$200,000
• Also applies to self-employment income
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22

23. Surtax on unearned income of higher-
income individuals
• New law: Medicare tax will apply to investment
income
• Imposed on individuals, estates and trusts
• Tax is 3.8% of lesser of
• Net investment income, or
• Excess of modified AGI over $250,000 for MFJ or
QW, $125,000 for MFS, $200,000 for others
• Net investment income: interest, dividends,
royalties, rents, passive activity gross income
and net gain from disposition of property
• Reduced by deductions
23

24. Higher threshold for deducting medical
expenses
• New law: raises floor from 7.5% of AGI to 10%
• AGI floor for individuals age 65 and older will
remain unchanged at 7.5% through 2016
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24

25. Dollar cap on contributions to health FSAs
• FSA (flexible spending arrangement): tax-
advantaged account that can be set up through
cafeteria plan of employer
• Allows employee to set aside a portion of earnings
to pay for expenses as established in cafeteria
plan (medical, dependent care, other)
• New law: allowable contributions to health FSAs
capped at $2,500 per year (indexed for inflation
after 2013)
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25

26. Tax Reform

27. Budget Control Act of 2011 (PL 112-25,
8/2/11)
• Initial $1T deficit reduction (2012-
2021) without raising revenue
• Second $1.5T deficit reduction
• Recommendations from Joint Select Committee on
Deficit Reduction
• May include fundamental tax changes
• Possible Tax Changes
• Lower individual and corporate rates
• Cutback in individual breaks (mortgage interest)
• Post 2012 expiration of Bush-era tax cuts
• Eliminate accelerated depreciation, domestic
production activities deduction, LIFO
• International: territorial tax regime
27

28. Budget Control Act (cont.)
• If JSC fails to approve a report, across-the-
board reductions must be implemented
• 50% defense & 50% domestic cuts in 2013
28

29. President Obama’s Tax Plan
• Individual tax rates
• Retain 10%, 15%, 25%, 28% rates
• Raise top two rates to 36% and 39.6% for those
earning over $250K MFJ, $200K Single
• Deductions and credits
• Reduce value of itemized deductions and other
preferences to 28% for families with income over
$250K
• Investment income
• Retain 15% rate for taxpayers with income under
$250K
• Raise rate to 20% for those making over $250K
29

30. President Obama’s Tax Plan (cont.)
• Alternative Minimum Tax
• Index 2011 exemption amounts to inflation
• Endorses Buffet Rule: households making more
than $1M pay at least 30%
• Estate tax
• $3.5M exemption; 45% tax rate
• Corporate rates
• Reduce top rate from 35% to 28%
• Other
• Eliminate industry specific tax breaks (oil and gas)
• Overhaul research credit
• Renew clean energy incentives
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31. Tax reform proposals to limit or eliminate
itemized deductions
• Obama
• Limit the benefit for higher income taxpayers to
28% of the deduction or exclusion
• Fiscal Commission
• Replace itemized deductions with a standard
deduction
• Replace certain favored deductions (mortgage
interest) with nonrefundable credits
• Simpson-Bowles
• Eliminate nearly all tax expenditures
• Restructure certain tax expenditures (replace
mortgage interest deduction with 15% refundable
credit)
31

32. Tax reform proposals (cont.)
• Bipartisan Policy Center
• Eliminate itemized deductions and standard
deduction
• Allow taxpayers to claim limited refundable credits
for mortgage interest and charitable contributions
• Wyden-Coats
• Repeal certain itemized deductions and credits
• Increase standard deduction ($30K MFJ, $15K
Single)
• Retain mortgage interest and charitable
contributions
32

33. Internal Revenue Service
Initiatives

34. IRS marks third anniversary of Return
Preparer Review
Mandatory registration and use of PTIN
• Anyone who is paid to prepare, or help prepare,
all or substantially all of a federal tax return,
including EAs
• PTIN valid for a calendar year, renewed
annually
34

35. Return Preparer Review (cont.)
Competency Test
• Available at more than 260 vendor testing
centers
• Certain preparers required to take test by
12/31/13
• CPAs, EAs and attorneys are exempt from test
• Certain non-signing preparers supervised by
CPAs, EAs or attorneys are exempt, as are non-
1040 preparers
• Determine if there is a test requirement; set a
test date, time and location: www.irs.gov/ptin
• More information: www.irs.gov/taxpros/tests
and select RTRP test
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36. Return Preparer Review (cont.)
Continuing Education
• The roughly 340,000 preparers who have
testing requirement also must complete 15
hours of continuing education courses each year
• 10 hours in federal tax law, 3 hours in federal
tax law changes, 2 hours in ethics
• Became effective January 2012; applies even if
preparer has not taken the test
• Hundreds of outlets offering IRS-approved CE
courses (www.irs.gov/taxpros/ce)
36

37. Return Preparer Review (cont.)
Ethics and Tax Compliance
• Ethical requirements that previously applied
only to CPAs, EAs and attorneys now apply to all
paid return preparers
• All paid preparers also will undergo a tax
compliance check and are subject to standards
for practice outlined in Treasury Department
Circular 230
37

38. Return Preparer Review (cont.)
Registered Tax Return Preparer (RTRP)
• Preparers who pass competency test and tax
compliance check
• Beginning in 2014, only RTRPs, EAs, CPAs and
attorneys will be authorized to prepare
individual income tax returns for compensation
38

39. Return Preparer Review (cont.)
Public Database
• IRS will create a publicly searchable database
• Allows taxpayers to see if preparers have met
IRS standards or to find a preparer in their zip
code area
• Will show credentials held by preparer
• Public education campaign to inform taxpayers
to use only CPAs, EAs, attorneys or RTRPs if
they pay to have taxes prepared
39

40. Intuit Resources
Intuit & National Association of Tax
Professionals (NATP) team up for
professional development
• http://www.natptax.com/intuit
• More than 300 live nationwide workshops,
facilitated online, self-study & webinar courses
designed by tax professionals
• Maintain CPA, EA, RTRP status with CPE courses
• EA Exam Preparation Course
• RTRP Exam Preparation Course
40

41. Tax-Related Identity Theft
General
• IRS distributed about 250K Identity Protection
Personal Identification Numbers (IP PINs) in
2012 filing season
• Expanded pilot program to protect victims of
previously confirmed cases of identity theft
• IRS estimated that it stopped at least $1.4B in
refund fraud in 2011
• IRS has identified more than 460K taxpayers
victimized since 2008
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42. Tax-Related Identity Theft (cont.)
New IP PIN each year
• IRS mails out unique 6 digit identifiers for use in
current season only
• A taxpayer who believes he/she was victimized
files Form 14039, Identity Theft Affidavit
• IRS verifies the information, then flags any
return filed under the taxpayer’s Taxpayer
Identification Number, to make sure it is not
filed fraudulently
• Taxpayer then uses IP PIN on return
42

43. Tax-Related Identity Theft (cont.)
System not infallible
• Difficult to issue quick refunds and check for
fraud
• IRS never initiates contact by email or social
media to request personal or financial
information
• Post office that delivers IRS notices is not
secure
• Taxpayer must keep the IP PIN private and
secure
43

44. IRS revises return preparer penalties
High impact penalties
• $50 for each failure to furnish taxpayer a completed copy
of return; up to $25,000 per preparer per year
• $50 per failure to sign a return; up to $25,000 per
preparer per year
• $50 for failure to furnish a PTIN per return; up to $25,000
per preparer per year
• $50 per failure to retain a copy or list; up to $25,000 for
any return period
• $50 per failure to file an information return (or include an
item thereon); up to $25,000 for any return period
• $500 per instance of a preparer endorsing a refund check
issued to a taxpayer
• $500 for failure to comply with EIC due diligence
requirement
44

45. Greater due diligence requirements for
earned income credit claims
• Paid Preparer's Earned Income Credit Checklist (Form
8867)
• Must meet due diligence requirements in determining
taxpayer's eligibility and credit amount
• Documentation for residency of qualifying child (e.g. school
records)
• Documentation for disability of qualifying child (e.g. doctor
statement)
• Existence of Schedule C business (e.g. Form 1099)
• Retain all supporting documents (checklist, worksheets, etc.)
for 3 years
• Failure could result in a $500 penalty for each infraction
45

46. Modernized e-File (MeF)
• Represents next generation
• Built on internet-based platform
• Benefits
• Faster processing time
• Improved error detection & more detailed rejection messages
• Expedited acknowledgements sent within minutes
• Attach PDF files
• Standardized business rules
• Individual returns: final year of phase-in period
• Doesn’t change way practitioners transmit returns
• Fully supported by Intuit products
46

47. IRS & Social Media
IRS2Go
• Smartphone application for iPhone, iTouch and
Android
YouTube
• Short, informative videos on various tax-related
topics
Twitter (@IRSnews)
• Tax-related announcements, news for tax
professionals and updates for job seekers
Audio files for podcasts
• Useful information on one tax-related topic per
podcast
47

48. IRS helps college-bound students with
financial aid application process
• IRS Data Retrieval Tool allows applicants to transfer tax
return data to FAFSA (Free Application for Federal Student
Aid) form
• Tool is free, easy and secure; saves time and improves
accuracy
• Need a Federal Student Aid PIN (can apply for one
through FAFSA process)
• If cannot use DRT, may need to obtain official transcript
from IRS
• To order tax return or tax account transcripts, go to
IRS.gov and select "Order a Transcript" or call toll-free
Transcript line at 1-800-908-9946
• IRS also offers money-saving information for college
students and their parents about tax credits and
deductions for qualifying tuition, materials and fees
• Link: Student's Page - College Bound
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49. Thanks for viewing!